On July 16, 2020, Soha & Lang, P.S. attorney Jillian Henderson was elected President of the Washington Defense Trial Lawyers (WDTL). WDTL provides education, recognition, collegiality, professional development, and advocacy for and on behalf of civil defense litigators. Jillian’s election culminates years of service. Congratulations Jillian and well done!
The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of . . . property damage to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such . . . property damage, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient, but the company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of the company’s liability has been exhausted by payment of judgments or settlements.
The court reasoned:
Because the phrase “exhausted by payment of judgments or settlements” is not defined by the policies, the court must look to its plain meaning. Though this phrase may seem straightforward at first glance, the fact cannot be overlooked that this is not an ordinary insurance coverage case, but instead involves an environmental action by DEQ and EPA. As summarized by another court:
In the typical coverage case, a primary insurer validly exhausts its indemnity limits when it pays a settlement or judgment resolving third party claims . . . In an environmental action like this one where the insured is faced an RAO (Remedial Action Order), however, there is no settlement or judgment in the usual sense of the words. For these reasons, it is difficult to ascertain precisely at which point indemnity limits may be validly exhausted. Consequently, in the context of an environmental action, the phrase “exhausted by payment of judgments or settlements” is ambiguous because it is subject to more than one reasonable interpretation. The court must therefore consider the context in which the term is used in the policy as well as the “broader context of the policy as a whole.”
The court found persuasive that for the purposes of compelling coverage for environmental claims, ORS 465.480 treats environmental claims as if they were lawsuits. The court further concluded that the DEQ and EPA orders and agreements with Siltronic included language of finality and an intent to create legally enforceable rights and responsibilities to a third party. The court found that there was no evidence that Wausau’s payment of the indemnity limits was anything other than in good faith. The underlying environmental action had been ongoing for nine years before Wausau declared exhaustion of the coverage limits. Additionally, and perhaps most importantly, Wausau accepted tender for coverage at the time that Siltronic gave notice of the environmental contamination actions against it. Within two months, it began paying the costs Siltronic incurred in response to DEQ’s and EPA’s various demands. and it continued to pay those costs for six years.
Staples v. Allstate Insurance Co., __ Wn.2d __, __P.3d ___, 2013 WL 25887 (January 24, 2013)
The insured, whose insurance claim was denied for failure to cooperate, brought action against his homeowners’ insurer, alleging breach of contract, bad faith, and violation of the Insurance Fair Conduct Act (IFCA). In the trial court, summary judgment was entered for the insurer, and the insured appealed. The Court of Appeals affirmed, and appeal was taken to the Washington Supreme court who then reversed.
The insured, John Staples (“Staples”) had his van stolen from a parking lot. In the van, Staples had stored a large collection of tools. When staples reported the theft to the police, he stated that the tools were worth approximately $15,000, and that his van was a “work truck” that was absically a “mobile workshop” for his business. Two weeks later, Staples submitted a claim for the theft loss under his homeowner’s policy issued by Allstate. Staples told Allstate that the tools were worth between $20,000 and $25,000 and were for his personal use although they could be used for work.
Based on Staples’ inconsistent statements to the police and the insurer, Allstate transferred staples claim tot he special investigation unit, which in turn requested that Staples provide information proving ownership of the tools, a sworn proof of loss and other documents. Allstate also recorded two statements from staples, neither of which was under oath. Over the next couple of months Staples failed to provide the requested information despite repeated written requests from Allstate. Three months later, Staples submitted a sworn proof of loss, and in response, Allstate requested an examination under oath (“EUO”) and further documents. When the documents were not provided, Allstate cancelled the EUO and stated that it would reschedule the EUO and requested that Staples contact Allstate to reschedule the EUO.
Staples hired an attorney that began making allegations of IFCA violations and accusing Allstate of making burdensome and vexatious requests. Staples did not attempt to reschedule his EUO or provide the documents that Allstate had requested. After giving Staples several extensions in which to comply with the EUO and document demands, and staples failure to do so, Allstate denied the claim. Staples instituted coverage litigation and Allstate moved for summary judgment based on Staples’ failure to cooperate.
3. What You Must Do After A LossIn the event of a loss to any property that may be covered by this policy, you must:….d) give us all accounting records, bills, invoices and other vouchers, or certified copies, which we may reasonably request to examine and permit us to make copies.….
f) as often as we reasonably require:….2) at our request, submit to examinations under oath, separately and apart from any other person defined as you or insured person and sign a transcript of the same.
The Court found that this language did not give Allstate an absolute right to conduct an EUO, but rather, “[g]iven the quasi-fiduciary nature of the insurance relationship, . . . . if an EUO is not material to the investigation or handling of a claim, an insurer cannot demand it.” Id. at *7. While the Court found that under the facts of the case it appeared that Allstate would have been justified in requesting an EUO, it found that genuine issues of material fact may have precluded summary judgment in this regard, but declined to decide the issue, and instead resolved the case on the following two issues.
The Court instead found that genuine issues of material fact precluded summary judgment because there was an issue of fact regarding whether (1) Staples substantially complied with Allstate’s request for an EUO; and (2) Allstate was actually prejudiced by Staples failure to cooperate. The Court reiterated that whether there has been a breach of the cooperation clause in measured by the yardstick of “substantial compliance” and further found that an insurer must supply affirmative proof that it was prejudiced by an insured’s non-cooperation in order to deny coverage based on a failure to cooperate. Finding issues of fact in these regards, the Court reversed and remanded to the trial court.
In a unanimous decision, The Washington Supreme Court held that Washington law prohibits binding arbitration clauses in insurance contracts. Dep’t of Transp. v. James River Ins. Co., __Wn.2d. __, _P.3d.__ (2013).
RCW 48.18.200(1)(b) prohibits insurance contracts from “depriving the courts of this state of the jurisdiction of action against the insurer.” The court found that this statue prohibits binding arbitration agreements in insurance contracts. The court also held that the statue was not preempted by the Federal Arbitration Act because of an exception in the act for state law regulating the business of insurance.